New OTC swaps rules must apply to all – U.S. regulatory official

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WASHINGTON, March 2 (Reuters) – Congress should not create blanket exemptions for end users from new rules designed to make trading of the over-the-counter derivatives more transparent, a commissioner on the top U.S. futures regulator said on Tuesday.

Michael Dunn said the Commodity Futures Trading Commission should be given the authority to exempt end users from requirements to trade and clear standardized derivatives on a case-by-case basis, but recommended against a broader exemption currently being considered by Senate committees.

“Allowing such a large class of transactions to be exempt from clearing would mean that dealers would have more risk on their books. If these dealers fail, this risk could affect the entire financial system,” Dunn said in remarks prepared for a National Futures Association regulatory seminar in Chicago.

Dunn’s comments are in line with CFTC Chairman Gary Gensler who has also argued against end user exemptions.

Senate banking and agriculture committees are currently working on bills that would give regulators oversight of the OTC derivatives market that the CFTC estimates is worth about $300 trillion in the United States alone.

The House of Representatives’ bill, passed in December, included clearing exemptions for end users. Senate committees working on legislation have also signaled they plan to include some exemptions, but details have not yet been released.